Word ‘Capital asset’ in section 2(14) does not necessarily mean that property, which assessee holds, must be his own

RELEVANT PARAGRAPH

7. We have heard the learned representatives of the parties and perused the record. The crux of the matter under consideration whether under the facts and circumstances of the case under consideration there is transfer of asset and same is liable to capital gains or loss. The case of the revenue is that the assessee was not the owner of the plot therefore there was no transfer which is liable to capital gains. We may note here that the AO did not dispute the calculation of long term capital loss. The relevant provisions of the Act to the issue under consideration are sections 2(14) and 2 (47) of the Act which read as under:-

(I4)”capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include—

(i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession;

(ii) personal effect, that is to say, movable property (including wearing apparel and furniture) held for personal us by the assessee or any member of his family dependent on him, but excludes—

(a) jewellery;

(b) archaeological collections;

(c) drawings;

(d) paintings;

(e) sculptures; or

(f) any work of art.

Explanation —For the purposes of this sub-clause, “jewellery ” includes—

(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;

(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;]

[(iii) agricultural land in India, not being land situate—

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous-year ; or

(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;]

[(iv) 6V2 per cent Gold Bonds. 1977 for 7 per cent Gold Bonds. 1980./ for National Defence Gold Bonds, 1980,] issued by the Central Government;}

[(v) Special Bearer Bonds, 1991, issued by the Central Government;]

[(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government;] “

“47 [“transfer “. in relation to a capital asset, includes, —

(t) the sale, exchange or relinquishment of the asset; or

(ii) the extinguishment of any rights therein ; or

(iii) the compulsory acquisition thereof under any law ; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment;] [or] [(iva) the maturity or redemption of a zero coupon bond; or]

[(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A 25 of the Transfer of Property Act, 1882 (4 of 1882) ; or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

Explanation.— For the purposes of sub-clauses (v) and (vi), “immovable property” shall have the same meaning as in clause (d) of section 269VA;]”

According to section 2(14) of the Income-tax Act, the word ‘capital asset’ means, ‘property of any kind held by an assessee’. Therefore it does not necessarily mean that the property, which the assessee holds, must be his own. As per the definition of capital assets under section 2(14) of the Act, any kind of property held by an assessee would come within the definition of ‘capital asset’. It is not possible to read the definition of ‘capital asset’ in a restrictive manner to mean that the property which the assessee owned by himself alone would come within the meaning of ‘capital asset’. In the case under consideration the agreement was executed, consideration was paid and possession of the plot was taken by the assessee. The assessee was having rights in the said plot which is evident from the fact that after sub division of plot, one of the portion of plot was given to M/S Lucas TVS Ltd vide agreement dated 11-3.2004 wherein the assessee was one of the party along with MIDC and consent of the assessee was taken. Under the circumstances surrender of rights of the assessee referred to above would amount to extinguishment of his rights in the land/ capital asset and therefore, it attracts capital gains/ loss.The orders of the revenue authorities are set aside and claim of the assessee is allowed.

Ground no 4

In the result appeal of the assessee is partly allowed.

NF